Onconetix Inc

Previous wording

We also own ENTADFI, an FDA-approved, once daily pill that combines finasteride and tadalafil for the treatment of BPH, a disorder of the prostate. However, in light of (i) the time and resources needed to continue pursuing commercialization of ENTADFI, and (ii) the Company’s cash runway and indebtedness, the Company has now determined to pause its commercialization of ENTADFI, as it explores strategic alternatives to monetize ENTADFI, such as a potential sale of the ENTADFI assets. To that end, the Company has engaged an investment advisor to assist with a potential sale or other transaction of the ENTADFI assets. As part of a cost reduction plan approved by the Board and in connection with our pause in commercializing ENTADFI, we terminated three employees involved with the ENTADFI program, effective April 30, 2024, with such individuals to continue assisting the Company on an as-needed, consulting basis. The Company continues to search for a new Chief Executive Officer.

Current wording

We also own ENTADFI, an FDA-approved, once daily pill that combines finasteride and tadalafil for the treatment of BPH, a disorder of the prostate. However, in light of (i) the time and resources needed to continue pursuing commercialization of ENTADFI, and (ii) the Company’s cash runway and indebtedness, the Company determined to pause its commercialization of ENTADFI during the first quarter of 2024, as it explores strategic alternatives to monetize ENTADFI, such as a potential sale of the ENTADFI assets. To that end, the Company engaged an investment advisor to assist with a potential sale or other transaction of the ENTADFI assets during the second quarter of 2024. There is currently no plan to resume commercialization of ENTADFI, and as such, if we are not able to consummate a sale or other transaction of the ENTADFI assets, we may abandon the assets and destroy our inventory of the product. In addition, as part of cost reduction efforts and in connection with our initial pause in commercializing ENTADFI, we terminated three employees involved with the ENTADFI program, effective April 30, 2024, with such individuals to continue assisting the Company on an as-needed, consulting basis. Based on the current circumstances surrounding ENTADFI, at June 30, 2024, the ENTADFI assets were fully impaired. Refer to Notes 4 and 5 in the accompanying condensed consolidated financial statements included elsewhere in this Report for further discussion. The Company continues to search for a new Chief Executive Officer.

Previous wording

Proclarix is an easy-to-use next generation protein-based blood test that can be done with the same sample as a patient’s regular Prostate-Specific Antigen (“PSA”) test. The PSA test is a well-established prostate specific marker that measures the concentration of PSA molecules in a blood sample. A high level of PSA can be a sign of prostate cancer. However, PSA levels can also be elevated for many other reasons including infections, prostate stimulation, vigorous exercise or even certain medications. PSA results can be confusing for many patients and even physicians. It is estimated over 50% of biopsies with elevated PSA are negative or clinically insignificant resulting in an overdiagnosis and overtreatment that impacts the physician’s routine, our healthcare system, and the quality of patients’ lives. Proclarix helps doctors and patients with unclear PSA test results through the use of our proprietary Proclarix Risk Score which delivers clear and immediate diagnostic support for further treatment decisions. No additional intervention is required, and results are available quickly. Local diagnostic laboratories can integrate this multiparametric test into their current workflow because Proclarix assays use the enzyme-linked immunosorbent assay (ELISA) standard, which most diagnostic laboratories are already equipped to process.

Current wording

Proclarix is an easy-to-use next generation protein-based blood test that can be done with the same sample as a patient’s regular Prostate-Specific Antigen (“PSA”) test. The PSA test is a well-established prostate specific marker that measures the concentration of PSA molecules in a blood sample. A high level of PSA can be a sign of prostate cancer. However, PSA levels can also be elevated for many other reasons including infections, prostate stimulation, vigorous exercise or even certain medications. PSA results can be confusing for many patients and even physicians. It is estimated over 50% of biopsies with elevated PSA are negative or clinically insignificant resulting in an overdiagnosis and overtreatment that impacts the physician’s routine, our healthcare system, and the quality of patients’ lives. Approximately 10% of all men have elevated PSA levels, commonly referred to as the diagnostic “grey zone”, of which only 20 – 40% present clinically with cancer. Proclarix is intended for use in diagnosing these patients where it is difficult to decide if a biopsy is necessary to verify a potential clinically significant cancer diagnosis. Proclarix helps doctors and patients with unclear PSA test results through the use of our proprietary Proclarix Risk Score which delivers clear and immediate diagnostic support for further treatment decisions. No additional intervention is required, and results are available quickly. Local diagnostic laboratories can integrate this multiparametric test into their current workflow because Proclarix assays use the enzyme-linked immunosorbent assay (ELISA) standard, which most diagnostic laboratories are already equipped to process.

Previous wording

Since our inception in October 2018 until April 2023, when we acquired ENTADFI, we devoted substantially all of our resources to performing research and development, undertaking preclinical studies and enabling manufacturing activities in support of our product development efforts, hiring personnel, acquiring and developing our technology and now deprioritized vaccine candidates, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio and raising capital to support and expand such activities.

Current wording

Since our inception in October 2018 until April 2023, when we acquired ENTADFI, we devoted substantially all of our resources to performing research and development, undertaking preclinical studies and enabling manufacturing activities in support of our product development efforts, hiring personnel, acquiring and developing our technology and now halted vaccine candidates, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio and raising capital to support and expand such activities.

Previous wording

Prior to the acquisition of ENTADFI, we managed one distinct business segment, which was research and development. Beginning in the second quarter of 2023, as a result of the acquisition of ENTADFI, for which we were working towards commercial launch, we operated in two business segments: research and development and commercial. During the third quarter of 2023, we halted our vaccine discovery and development programs, and accordingly, we now operate in one segment: commercial. Our recent acquisition of Proteomedix during the fourth quarter of 2023 and its related diagnostic product Proclarix was determined to be within our commercial segment. The research and development segment was our historical business, and was dedicated to the research and development of various vaccines to prevent infectious diseases. The commercial segment was new in the second quarter of 2023 and is dedicated to the commercialization of our products approved for sale, currently, Proclarix in Europe.

Current wording

During the third quarter of 2023, we halted our vaccine discovery and development programs, and accordingly, we now operate in one segment: commercial. The commercial segment was new in the second quarter of 2023 and is currently dedicated to the commercialization of Proclarix in Europe.

Previous wording

We do not have any products approved for sale, aside from Proclarix, from which we have generated only minimal amounts of development revenue since its acquisition, and ENTADFI, from which we have not generated any revenue from product sales, and for which we have determined to pause commercialization activities and as we explore strategic alternatives to monetize ENTADFI, such as a potential sale of the ENTADFI assets. To date, we have financed our operations primarily with proceeds from our sale of preferred securities to seed investors, the initial public offering, the private placements completed during 2022, the proceeds received from a warrant exercise in August 2023, and the proceeds received from the issuance of debt in January 2024. We will continue to require significant additional capital to commercialize Proclarix, and to fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding and to rely on third-party resources for marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches, to support our operations.

Current wording

We do not have any products approved for sale, aside from Proclarix in the European Union, and ENTADFI, from which we have not generated any revenue from product sales, and which we have now abandoned commercialization activities for. We are exploring strategic alternatives to monetize ENTADFI, such as a potential sale of the ENTADFI assets. However, if we are not able to consummate a sale or other transaction of the ENTADFI assets, we may abandon the assets and destroy our inventory of the product. To date, we have financed our operations primarily with proceeds from our sale of preferred securities to seed investors, the initial public offering, the private placements completed during 2022, the proceeds received from a warrant exercise in August 2023, the proceeds received from the issuance of debt in January 2024, and the proceeds received from a warrant exercise in July 2024. We will continue to require significant additional capital to commercialize Proclarix, and to fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue, if ever, we expect to finance our cash needs through public or private equity or debt financings, third-party funding and to rely on third-party resources for marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches, to support our operations.

Previous wording

On January 23, 2024, the Company issued a non-convertible debenture (the “Altos Debenture”) in the principal sum of $5.0 million, in connection with a Subscription Agreement, to Altos Ventures, a stockholder of the Company and related party (“Altos”). The Altos Debenture has an interest rate of 4.0% per annum, and the principal and accrued interest was to be payable in full upon the earlier of (i) the closing under the Subscription Agreement and (ii) June 30, 2024. Additionally, the $5.0 million subscription amount under the Subscription Agreement shall be increased by the amount of interest payable under the Altos Debenture. On April 24, 2024, the Altos Debenture was amended to extend the maturity date to the earlier of (i) the closing under the Subscription Agreement and (ii) October 31, 2024 (the “Altos Amendment”).

Current wording

On January 23, 2024, the Company issued a non-convertible debenture (the “Altos Debenture”) in the principal sum of $5.0 million, in connection with a Subscription Agreement, to Altos Ventures, a stockholder of the Company and related party (“Altos”). The Altos Debenture was originally payable in full upon the earlier of (i) the closing under the Subscription Agreement and (ii) June 30, 2024. On April 24, 2024, the Altos Debenture was amended to extend the maturity date to the earlier of (i) the closing under the Subscription Agreement and (ii) October 31, 2024 (the “Altos Amendment”).

Previous wording

We have incurred net losses since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, our expenditures on other research and development activities and commercialization activities. As of March 31, 2024, the Company had a working capital deficit of approximately $15.1 million and an accumulated deficit of approximately $63.2 million. In addition, as of May 15, 2024, the Company’s cash balance was approximately $1.9 million. The Company believes that its current cash balance is only sufficient to fund its operations into the third quarter of 2024, and as such, we will need to raise additional capital prior to this to sustain operations. In addition, if Stockholder Approvalfor certain transactions involving the Company’s Series B Preferred Stock is not obtained by January 1, 2025, the Company may be obligated to cash settle the Series B Preferred Stock. Based on the closing price of $0.156 for the Company’s stock as of May 17, 2024, the Series B Preferred Stock would be redeemable for approximately $42.1 million.

Current wording

We have incurred net losses since inception and expect to continue to incur net losses in the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in large part on the timing of our preclinical studies, clinical trials and manufacturing activities, our expenditures on other research and development activities and commercialization activities. As of June 30, 2024, the Company had a working capital deficit of approximately $18.6 million and an accumulated deficit of approximately $82.2 million. In addition, as of August 22, 2024, the Company’s cash balance was approximately $1.0 million. The Company believes that its current cash balance is only sufficient to fund its operations into September 2024, and as such, we will need to raise additional capital prior to this to sustain operations. In addition, if Stockholder Approval for certain transactions involving the Company’s Series B Preferred Stock is not obtained by January 1, 2025, the Company may be obligated to cash settle the Series B Preferred Stock. Based on the closing price of $0.155 for the Company’s common stock as of August 26, 2024, the Series B Preferred Stock would be redeemable for approximately $41.9 million.

Previous wording

Until we generate revenue sufficient to support self-sustaining cash flows, if ever, we will need to raise additional capital to fund our continued operations, including our product development and commercialization activities related to our current and future products. There can be no assurance that additional capital will be available to us on acceptable terms, or at all, or that we will ever generate revenue sufficient to provide self-sustaining cash flows. These circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements of Onconetix, as of and for the three months ended March 31, 2024, included elsewhere in this Report do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Current wording

Until we generate revenue sufficient to support self-sustaining cash flows, if ever, we will need to raise additional capital to fund our continued operations, including our product development and commercialization activities related to our current and future products. There can be no assurance that additional capital will be available to us on acceptable terms, or at all, or that we will ever generate revenue sufficient to provide self-sustaining cash flows. These circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements as of and for the six months ended June 30, 2024, included elsewhere in this Report do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Previous wording

On March 23, 2023, Proteomedix entered into a license agreement Laboratory Corporation of America (“Labcorp”) pursuant to which Labcorp has the exclusive right to develop and commercialize Proclarix, and other products developed by Labcorp using Proteomedix’s intellectual property covered by the license, in the United States (“Licensed Products”). In consideration for granting Labcorp an exclusive license, Proteomedix received an initial license fee in the mid-six figures upon signing of the contract. Additionally, Proteomedix is entitled to royalty payments of between 5% and 10% on the net sales recognized by Labcorp of any Licensed Products plus milestone payments as follows:

Current wording

On March 23, 2023, Proteomedix entered into a license agreement Laboratory Corporation of America (“Labcorp”) pursuant to which Labcorp has the exclusive right to develop and commercialize Proclarix, and other products developed by Labcorp using Proteomedix’s intellectual property covered by the license, in the United States (“Licensed Products”). In consideration for granting Labcorp an exclusive license, Proteomedix received an initial license fee in the mid-six figures upon signing of the contract. Additionally, Proteomedix is entitled to royalty payments between 5% and 10% on the net sales recognized by Labcorp of any Licensed Products plus milestone payments as follows:

Previous wording

On July 21, 2023, the Company, entered into a Licensing and Services Master Agreement (“Master Services Agreement”) and a related statement of work with a vendor, pursuant to which the vendor was to provide to the Company commercialization services for the Company’s products, including recruiting, managing, supervising and evaluating sales personnel and providing sales-related services for such products, for fees totaling up to $29.1 million over the term of the statement of work. The statement of work had a term through September 6, 2026, unless earlier terminated in accordance with the Master Services Agreement and the statement of work. On July 29, 2023, a second statement of work was entered into with the same vendor for certain subscription services providing prescription market data access to the Company. The fees under the second statement of work totaled approximately $800,000, and the term was through July 14, 2025. On October 12, 2023, the Company terminated the Master Services Agreement and the statements of work. The Company recorded approximately $3.1 million in expense related to this contract during the year ended December 31, 2023, which is included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss. The Company had approximately $1.5 million and $1.8 million recorded in related accounts payable as of March 31, 2024 and December 31, 2023, respectively, which includes amounts due for early termination of the contract. See Note 6 to our consolidated financial statements included elsewhere in this Report.

Current wording

On July 21, 2023, the Company, entered into a Licensing and Services Master Agreement (“Master Services Agreement”) and a related statement of work with IQVIA, pursuant to which IQVIA was to provide to the Company commercialization services for the Company’s products, including recruiting, managing, supervising and evaluating sales personnel and providing sales-related services for such products, for fees totaling up to $29.1 million over the term of the statement of work. The statement of work had a term through September 6, 2026, unless earlier terminated in accordance with the Master Services Agreement and the statement of work. On July 29, 2023, a second statement of work was entered into with the IQVIA for certain subscription services providing prescription market data access to the Company. The fees under the second statement of work totaled approximately $800,000, and the term was through July 14, 2025. On October 12, 2023, the Company terminated the Master Services Agreement and the statements of work. The Company recorded net credits of approximately $0.1 million and $0.4 million related to this contract during the three and six months ended June 30, 2024, respectively, which is included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss. The Company had approximately $1.1 million and $1.8 million recorded in related accounts payable as of June 30, 2024 and December 31, 2023, respectively, which includes amounts due for early termination of the contract. See Note 6 to our consolidated financial statements included elsewhere in this Report.

Previous wording

Selling, general and administrative expenses consist principally ofcommercialization activities, payroll, and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, information technology costs, costs incurred with respect to acquisitions and potential acquisitions, and other general operating expenses.

Current wording

Selling, general and administrative expenses consist principally of commercialization activities, payroll, and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, information technology costs, costs incurred with respect to acquisitions and potential acquisitions, and other general operating expenses.

Previous wording

We anticipate that our selling, general and administrative expenses will continue to increase when compared to historical levels as a result of efforts to commercialize Proclarix, costs associated with integration of Proteomedix’s operations, as well as expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the applicable stock exchange and the SEC requirements, investor relations costs and director and officer insurance premiums associated with being a public company.

Current wording

We anticipate that our selling, general and administrative expenses related to Proteomedix will increase when compared to historical levels as a result of efforts to commercialize Proclarix, and costs associated with integration of Proteomedix’s operations.

Previous wording

Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses historically have included fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll, and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees. We expense both internal and external research and development expenses as they are incurred.

Current wording

Historically, substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses historically have included fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll, and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees. We expense both internal and external research and development expenses as they are incurred.

Previous wording

We expect our research and development expenses to increase if research and development activities are resumed. Predicting the timing or cost to complete our clinical programs for future product candidates, or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control, such as regulatory approvals. Furthermore, we are unable to predict when or if our future product candidates will receive regulatory approval with any certainty.

Current wording

As discussed above, we have terminated the vaccine programs that substantially all of our research and development historically related to. We do not anticipate incurring significant research and development expenses in the near future, unless we are able to resume such activities. Predicting the timing or cost to complete our clinical programs for future product candidates, or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control, such as regulatory approvals. Furthermore, we are unable to predict when or if our future product candidates will receive regulatory approval with any certainty.

Previous wording

For the three months ended March 31, 2024, the Company had approximately $0.7 million of revenue, which was attributable to sales and development services generated by Proteomedix. Cost of revenue of approximately $0.5 million is attributable to costs incurred on Proteomedix revenue including amortization of the product rights intangible asset of approximately $0.2 million. The Company did not have any revenue during the three months ended March 31, 2023.

Current wording

For the three months ended June 30, 2024, the Company had approximately $0.7 million of revenue, which was attributable to development services generated by Proteomedix. Cost of revenue of approximately $0.6 million was attributable to costs incurred on Proteomedix revenue including amortization of the product rights intangible asset of approximately $0.2 million, in addition to approximately $0.4 million related to the full impairment of ENTADFI inventory. The Company did not have any revenue during the three months ended June 30, 2023.

Previous wording

For the three months ended March 31, 2024, research and development expenses decreased by approximately $1.0 million compared to the same period in 2023. Thedecrease was primarily due to the Company’s decision to halt its vaccine programs and focus on commercialization activities, which occurred during the third quarter of 2023. This change in business strategy led to a pause in the Company’s clinical and other research activities, and a resulting decrease of approximately $1.1 million due to decreased costs for related outside services and reduced compensation expense. This was slightly offset by an increase related to Proteomedix’s research and development activities of approximately $0.1 million.

Current wording

For the three months ended June 30, 2024, research and development expenses decreased by approximately $0.9 million compared to the same period in 2023. The decrease was primarily attributable to the Company’s decision to halt its vaccine programs and focus on commercialization activities, which occurred during the third quarter of 2023. This change in business strategy led to a halt in the Company’s clinical and other research activities. The decrease was only slightly offset by minimal research and development activities still ongoing at Proteomedix.

Previous wording

During the three months ended March 31, 2024, the Company recorded an impairment loss of approximately $5.2 million related to goodwill recorded in connection with the PMX acquisition and an impairment loss of approximately $2.3 million on the assets acquired as part of the ENTADFI asset acquisition. No such impairments were recorded in the same period in 2023.

Current wording

During the three months ended June 30, 2024, the Company recorded an impairment loss of approximately $10.3 million related to goodwill recorded in connection with the PMX acquisition, and an impairment loss of approximately $1.2 million on the assets acquired as part of the ENTADFI asset acquisition.

Previous wording

Other expense incurred during the three months ended March 31, 2024 increased by approximately $0.2 million compared to the same period in 2023. The increase relates to approximately $0.4 million of interest expense incurred on notes payable issued in April 2023 related to the acquisition of ENTADFI and the related party debenture issued in January 2024, offset by the change in fair value of the related party subscription agreement liability of approximately $0.2 million.

Current wording

Other expense incurred during the three months ended June 30, 2024, increased by approximately $0.4 million compared to the same period in 2023. The increase was primarily due to $0.2 million of interest expense related to the Altos Debenture issued in January 2024, in addition to an increase of $0.2 million in the change in fair value of the subscription liability.

Previous wording

The Company recorded an income tax benefit of approximately $0.1 million during the three months ended March 31, 2024, related to foreign deferred income taxes in connection with Proteomedix. There was no income tax benefit or expense recorded during the same period in 2023.

Current wording

The Company recorded an income tax expense of approximately $51,000 during the three months ended June 30, 2024, related to foreign deferred income taxes recorded in connection with Proteomedix. There was no income tax benefit or expense recorded during the same period in 2023.

Previous wording

The Company’s operating activities to date have been devoted to seeking licenses, engaging in research and development activities, potential asset and business acquisitions, and expenditures associated with the commercial launch of ENTADFI and the commercialization of Proclarix.

Current wording

The Company’s operating activities to date have been devoted to seeking licenses, engaging in research and development activities, potential asset and business acquisitions, and expenditures associated with the previously planned commercial launch of ENTADFI and the commercialization of Proclarix.

Previous wording

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future. As of March 31, 2024, the Company had cash of approximately $4.5 million, a working capital deficit of approximately $15.1 million and an accumulated deficit of approximately $67.9 million. In addition, as of May 15, 2024, the Company’s cash balance was approximately $1.9 million. The Company believes that its current cash balance is only sufficient to fund its operations into the third quarter of 2024 and this raises substantial doubt about the Company’s ability to continue as a going concern within one year from the date of the issuance of these consolidated financial statements, and indicates that the Company is unable to meet its contractual commitments and obligations as they come due in the ordinary course of business. The Company will require significant additional capital in the short-term to fund its continuing operations, satisfy existing and future obligations and liabilities, including the remaining payments due for the acquisition of the ENTADFI assets, payment due on the Debenture, in addition to funds needed to support the Company’s working capital needs and business activities. These business activities include the commercialization of Proclarix, and the development and commercialization of the Company’s future product candidates. In addition, as discussed more fully in Note 5, if stockholder approval is not obtained by January 1, 2025 with respect to the Series B Convertible Redeemable Preferred Stock issued in connection with the acquisition of Proteomedix, these shares become redeemable for cash at the option of the holders, and the Company currently does not have sufficient cash to redeem such shares. Based on the closing price of $0.156 for the Company’s stock as of May 17, 2024, the Series B Convertible Redeemable Preferred Stock would be redeemable for approximately $42.1 million.

Current wording

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future. As of June 30, 2024, the Company had cash of approximately $0.9 million, a working capital deficit of approximately $18.6 million and an accumulated deficit of approximately $82.2 million. In addition, as of August 22, 2024, the Company’s cash balance was approximately $1.0 million. The Company believes that its current cash balance is only sufficient to fund its operations into September 2024 and this raises substantial doubt about the Company’s ability to continue as a going concern within one year from the date of the issuance of these consolidated financial statements, and indicates that the Company is unable to meet its contractual commitments and obligations as they come due in the ordinary course of business. The Company will require significant additional capital in the short-term to fund its continuing operations, satisfy existing and future obligations and liabilities, including the remaining payments due for the acquisition of the ENTADFI assets, payment due on the Debenture, in addition to funds needed to support the Company’s working capital needs and business activities. These business activities include the commercialization of Proclarix, and the development and commercialization of the Company’s future product candidates. In addition, as discussed more fully in Note 5, if stockholder approval is not obtained by January 1, 2025 with respect to the conversion of the Series B Convertible Redeemable Preferred Stock issued in connection with the acquisition of Proteomedix, these shares become redeemable for cash at the option of the holders, and the Company currently does not have sufficient cash to redeem such shares. Based on the closing price of $0.155 for the Company’s common stock as of August 26, 2024, the Series B Convertible Redeemable Preferred Stock would be redeemable for approximately $41.9 million.

Previous wording

Management’s plans for funding the Company’s operations include generating product revenue from sales of Proclarix, which may still be subject to further successful commercialization activities within certain jurisdictions. In addition, as discussed above, the Company has paused commercialization activities for ENTADFI and it is exploring strategic alternatives for its monetization, such as a potential sale of the ENTADFI assets for which the Company has engaged a financial advisor to assist with. Management’s plans also include attempting to secure additional required funding through equity or debt financings if available. However, there are currently no commitments in place for further financing nor is there any assurance that such financing will be available to the Company on favorable terms, if at all. This creates significant uncertainty that the Company will have the funds available to be able to sustain its operations and expand commercialization of Proclarix. If the Company is unable to secure additional capital, it may be required to curtail any future clinical trials, development and/or commercialization of future product candidates, and it may take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations.

Current wording

Management’s plans for funding the Company’s operations include generating product revenue from sales of Proclarix, which is still subject to further successful commercialization activities within certain jurisdictions. In addition, as discussed above, the Company paused commercialization activities for ENTADFI during the first quarter of 2024, as it explores strategic alternatives for its monetization, such as a potential sale of the ENTADFI assets for which the Company engaged a financial advisor to assist with during the second quarter of 2024. There is currently no plan to resume commercialization of ENTADFI, and as such, if we are not able to consummate a sale or other transaction of the ENTADFI assets, we may abandon the assets and destroy our inventory of the product. Management’s plans also include attempting to secure additional required funding through equity or debt financings if available. However, there are currently no commitments in place for further financing nor is there any assurance that such financing will be available to the Company on favorable terms, if at all. This creates significant uncertainty that the Company will have the funds available to be able to sustain its operations and expand commercialization of Proclarix. If the Company is unable to secure additional capital, it may be required to curtail any future clinical trials, development and/or commercialization of future product candidates, and it may take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations, or, if it is required to, file for bankruptcy.

Previous wording

Because of historical and expected operating losses and net operating cash flow deficits, there is substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the condensed consolidated financial statements, which is not alleviated by management’s plans. The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

Current wording

Because of historical and expected operating losses, net operating cash flow deficits, and debts due within one year, there is substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the condensed consolidated financial statements, which is not alleviated by management’s plans. The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

Previous wording

Our primary uses of cash to date have been to fund our operations, which consist primarily of research and development expenditures related to our programs, costs related to acquisitions and potential acquisitions, commercializing ENTADFI and other selling, general and administrative expenditures. We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to commercialize Proclarix, and expand our corporate infrastructure, including the costs associated with being a public company.

Current wording

We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to commercialize Proclarix and expand our corporate infrastructure.

Previous wording

We will require significant amounts of additional capital in the short-term, to continue to fund our continuing operations, satisfy existing and future obligations and liabilities, including the remaining payments due under the Veru APA and other contracts entered into in support of the Company’s commercialization plans, in addition to funds needed to support our working capital needs and business activities, including the commercialization of Proclarix, and the development and commercialization of our future product candidates. Until we can generate a sufficient amount of revenue from sales of Proclarix, we expect to finance our future cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The future sale of equity or convertible debt securities may result in dilution to our stockholders, and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financing may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of our business activities.

Current wording

We will require significant amounts of additional capital in the short-term, to continue to fund our continuing operations, satisfy existing and future obligations and liabilities, including the remaining payments due under the Veru APA and other contracts entered into in support of the Company’s commercialization plans, in addition to funds needed to support our working capital needs and business activities, including the commercialization of Proclarix, and the development and commercialization of our future product candidates. Until we can generate a sufficient amount of revenue from sales of Proclarix, we expect to finance our future cash needs through public or private equity or debt financings, third-party funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The future sale of equity or convertible debt securities may result in dilution to our stockholders, and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financing may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of our business activities.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was approximately $5.2 million, which primarily resulted from a net loss of $11.1 million, a decrease in the fair value of the subscription agreement liability of $0.2 million, a deferred tax benefit of $0.1 million, and a net change in our operating assets and liabilities of $1.9 million. This was offset by an impairment loss of $5.2 million related to goodwill recorded in connection with the acquisition of Proteomedix, an impairment loss of $2.3 million related to the ENTADFI assets, noncash interest expense of $0.4 million, and depreciation and amortization expense of $0.2 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was approximately $8.4 million, which primarily resulted from a net loss of approximately $25.4 million and a net change in our operating assets and liabilities of approximately $3.5 million, adjusted for the non-cash impairments of goodwill and ENTADFI of approximately $15.5 million and $3.5 million, respectively, depreciation and amortization expense of approximately $0.4 million, loss on impairment of ENTADFI inventory of approximately $0.4 million, in addition to noncash interest expense of approximately $0.8 million.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was $4.4 million, which primarily resulted from a net loss of $2.8 million and a net change in our operating assets and liabilities of $1.8 million, which was partially offset by noncash stock-based compensation of approximately $0.2 million.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was approximately $6.2 million, which primarily resulted from a net loss of $9.7 million, and a net change in our operating assets and liabilities of $0.9 million. These changes were adjusted by an impairment loss of $3.5 million related to the deposit on the WraSer APA, noncash stock-based compensation of approximately $0.5 million, the loss on related party receivable of approximately $0.2 million, and noncash interest expense of approximately $0.2 million.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 of approximately $5,000 resulted from purchases of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 of approximately $22,000 resulted from purchases of property and equipment.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2023 was approximately $36,000, which resulted from purchases of property and equipment and the net change in the receivable from related parties.

Current wording

Net cash used in investing activities for the six months ended June 30, 2023 was approximately $10.0 million, of which approximately $6.1 million was used for the acquisition of ENTADFI, $3.5 million was used for the deposit in connection with the WraSer APA, and approximately $0.4 million is the net change in the receivable from related parties.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 was approximately $5.2 million, and resulted primarily from the issuance of an aggregate of $5.7 million in notes payable, consisting of a $5.0 million debenture and $0.7 million for the financing for certain director and officer liability insurance policy premiums, offset by the payment of $0.4 million in financing costs and $0.1 million in payment on one of the notes payable.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 was approximately $4.9 million, and resulted primarily from the issuance of an aggregate of approximately $5.7 million in notes payable, consisting of a $5.0 million debenture and approximately $0.7 million for the financing of director and officer liability insurance policy premiums, offset by approximately $0.4 million in payments on the notes payable and $0.4 million in the payment of financing costs.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2023 was $49,000, and resulted from $33,000 in purchases of treasury shares and $16,000 of payment in deferred offering costs.

Current wording

Net cash used in financing activities for the six months ended June 30, 2023 was approximately $0.3 million, and resulted from approximately $0.1 million in purchases of treasury shares and approximately $0.2 million of payment in deferred offering costs.